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  Lacroix v. Canada Mortgage and Housing Corp.

Between
Nicole Lacroix and Rosie Ladouceur, plaintiffs, and
Canada Mortgage and Housing Corporation and
Marc Rochon, Claude Poirier-Defoy, Jim Millar,
Karen Kinsley, Gerald Norbraten, Jean-Guy Tanguay,
David Metzak, Brian Knight and George Hendela, being
the Trustees of the Canada Mortgage and Housing
Corporation Pension Fund, defendants

[2001] O.J. No. 6251
Court File No. 99-CV-0694

Ontario Superior Court of Justice
M.Z. Charbonneau J.

Heard: March 8, 2001.
Judgment: July 6, 2001.
(56 paras.)

Civil procedure — Parties — Class or representative actions — Certification — Common interests — Defendant's motion to decertify class dismissed, but plaintiff prevented from adducing certain evidence dealing with alleged misrepresentations involving surplus.

Pensions and Benefits law — Pensions — Administration of pensions — Surplus funds — Private plans — Contributions by employer and employee — Trust obligations — Defendant's motion to decertify class dismissed, but plaintiff prevented from adducing certain evidence dealing with alleged misrepresentations involving surplus.

Plaintiffs opted to take commuted value of pension benefits when took early retirement from defendant — In some cases, releases signed or amended and then signed by individual plaintiffs — Afterwards, defendant allocated portion of surplus in pension plan to enhance benefits for other plan members and recoup costs of granting early retirement — Plaintiffs alleging portion of surplus so used held for them in trust and defendant's use constituted breach of trust and fiduciary duty — Class proceeding certified but plaintiffs now attempting to introduce evidence defendant claimed was not common to class members requiring individualized assessments — Defendant moving to have action decertified or, in the alternative, order preventing plaintiffs from tendering new evidence of individual states of knowledge, understanding and or reliance in general and in particular regarding impact of their election on surplus entitlements — Motion allowed in respect of alternative relief sought — Important common issues best dealt with by way of class proceeding still remained — However, plaintiffs not permitted to adduce evidence of individual misrepresentations affecting validity of individual members' elections, except misrepresentations or failures to communicate regarding status of surplus and uses to which defendant intended to have it applied.

Statutes, Regulations and Rules Cited:

Class Proceedings Act, s. 5, s. 5(1)(c), s. 5(1)(d), s. 5(1)(e) (ii), s. 10

Income Tax Act

Counsel:

W.J. Sammon and James B. Barnes, for the plaintiffs

J. Brett Ledger and Lawrence E. Ritchie, for the defendants

REASONS FOR JUDGMENT

 1      M.Z. CHARBONNEAU J.:— The plaintiffs instituted this action by statement of claim issued in July '99. The plaintiffs claim damages for breach of trust and breach of fiduciary duty on behalf of themselves and all other former employees of CMHC who left the employment of CMHC between January 1st, 1995 and October 23, 1998.

 2      On consent and further to minutes of settlement filed by the parties the action was certified as a national class action on May 4, 2000. The defendants bring this motion pursuant to Section 10 of the Act for a decertification order.

 3      In 1995, CMHC started a program to downsize its work force. This is referred to as the Work Force Adjustment Program. As a result of this program, the work force was reduced by approximately 1400 employees. The departing employees were given various options which in some cases allowed for early retirement. The plaintiffs and the class they represent opted to take the commuted value of their pension benefit. The plaintiffs and most of the class members signed releases when they exercised their option. Each member did not sign the same release. Some members modified the release before signing it. Others refused to sign the release. Granting early retirement with full pension to some employees cost $59.4 million in additional benefits which would not have been otherwise payable.

 4      Some members could not have the entire pension contributions transferred out of the pension plan because of the provisions of the Income Tax Act. They were allowed to remain members of the pension plan to the extent of a transfer restriction annuity ("TRA").

 5      In 1997, CMHC decided to undertake a review of the surplus in its employee pension plan. That study was conducted between December 1997 and October 1998. During that time the surplus rose to $128.7 million. CHMC decided in October 1998 to divide $100 million of the surplus as follows: $60 million to CMHC and $40 million to the plan members. The $60 million was to be applied to the costs of granting the early retirement benefits and the $40 million was to be returned to active plan members in the form of enhanced benefits. Plan members were declared to be those individuals who were members of the Plan as of January 1st, 1999. By that date, the plaintiffs and the other class members had already terminated their membership in the pension plan.

 6      The plaintiffs allege that the surplus was held in trust for them, that they have a beneficial interest in those funds and that they are entitled to an equitable share of those funds. In using these surplus funds without allocating to the plaintiffs their equitable share, the defendants are alleged to have committed a breach of trust and/or a breach of fiduciary duty.

 7      Paragraphs 16, 17 and 18 of the amended Statement of Claim give particulars of the alleged breach of trust:

16.

In its downsizing campaign, CMHC offered the Plaintiffs class members several alternatives, including:

(a)

a transfer of commuted value of deferred pension;
(b)

a deferred pension payable at sixty;
(c)

transfer of pension contributions to an eligible employer; and
(d)

if qualified, early retirement.

17.

In making these offers during this downsizing campaign, CMHC and the trustees never advised the Plaintiffs and the class members that:

(a)

the huge surplus that existed was part of a Pension Fund that was subject to a Trust Agreement where The Plaintiffs and other class members were beneficiaries of that trust along with other current or retired employees of CMHC;
(b)

CMHC and the trustees were planning to use this Huge surplus not only to enhance benefits of current and retired employees but to pay for the cost of downsizing.

18.

Contrary to its trust obligations, CMHC and the trustees represented to the Plaintiffs and other class members that this surplus belonged solely to CMHC and that CMHC could do what it wanted with it. This misrepresentation was contrary to the true nature of the surplus which was impressed with a trust arising out of the Trust Agreement.

 8      Paragraph 22 of the Statement of Claim alleges that the defendants preferred their own interest over that of the plaintiffs to whom they owed a trust and/or a fiduciary duty.

 9      Paragraph 25(a) alleges that the defendants breached their fiduciary obligations by:

(a)

they did not advise the plaintiffs or other class members of the beneficial nature of the surplus in timely fashion or at all

 10      Paragraph 27 alleges that the defendants breached their trust relationships with the plaintiffs by:

(a)

failing to advise the Plaintiffs and other class members in a timely fashion of the nature of the surplus;
(b)

failing to advise the Plaintiffs and other class members in a timely fashion that they were beneficiaries of the pension surplus;

 11      Paragraph 29 deals with the effect of the releases signed by the Plaintiffs. It states:

29.

Because of the foregoing, the Plaintiffs and other class members state that any compromise agreements they may have executed on leaving the employ of CMHC is void or voidable in relation to the claim for their proportionate share in the pension surplus and, in any event, such compromise agreements specifically noted they did not affect the benefit provisions pertaining to the CMHC Pension Fund. [Emphasis added]

 12      And finally, paragraph 30 states:

Further, in failing to advise the Plaintiffs and other class members of their beneficial interest in the pension surplus, the Defendants deprived the Plaintiffs and class members of the option of remaining in the PF (pension plan) or taking an enhanced deferred benefit based on the surplus in the Plan ...

 13      During cross-examination on the affidavits filed in support of the certification motion, counsel for the defendants questioned Nicole Lacroix as to exactly what representations the plaintiffs were relying on as constituting breaches of trust or fiduciary duty as alleged by paragraphs 17, 18, 25, 27, 29 and 30. The following portion of the transcript of the cross-examination of Nicole Lacroix on April 10, 2000 sets out the gist of that inquiry:

MR. LEDGER: ... The question is do the Plaintiffs intend to take the position that some information should have been communicated to them at or before the time when they made their election? Is that your complaint?

MR. SAMMON: No.

THE WITNESS: No.

MR. LEDGER: That's not your complaint? You don't take that position in this lawsuit?

MR. SAMMON: No. No. Unless the information that you're referring to is the ownership of the surplus. It's our position that CMHC should have indicated to the employees all along that they were trustees of the surplus but the employees had a beneficial interest in it.

MR. LEDGER: Well, aren't you saying that they failed to communicate that?

MR. SAMMON: Well, certainly. They took the opposite position in their communiques.

MR. LEDGER: So, that is a failure to communicate that you're alleging?

MR. SAMMON: Well, if that's the way you want to categorize it, yes. But if you categorize it as a breach of trust, it's simply a breach of trust where they failed to protect the interest of the beneficial owners.

MR. LEDGER: And that's the only failure to communicate you're alleging, is that what you're saying?

MR. SAMMON: Basically, yes.

 14      In fact, the words "Because of the foregoing" in paragraph 29 could only be taken to be a reference to the failure to inform about the alleged trust relationship and, the corresponding beneficial interest in the surplus. It could not refer to any other misrepresentation which could make the releases signed by the plaintiffs void or voidable. The plaintiffs' answer was consistent with the plaintiffs' pleading.

 15      The Statement of Claim contains no express allegations of misrepresentation other than the one discussed above. The two reasons actually pleaded that would render the releases ineffective to bar the plaintiff's claim to the surplus would be:

a)

Failure to inform about the trust nature of the surplus and the plaintiffs' beneficial interest therein in the context of the alleged partial distribution of the surplus as described above; and
b)

The language of the release itself which "specifically noted they did not effect the benefit provisions of the CMHC pension fund" (paragraph 29).

More will be said later on that last allegation.

 16      The plaintiffs' motion for certification proposed the following common issues:

i)

Did CMHC and the trustees, or either one of the defendants, hold the pension surplus in trust for the class members?
ii)

If CMHC and the trustees, or either one of them, held the pension surplus in trust for the class members, did they, or either one of them, breach their trust obligations to the class members by failing to ensure the class members received their equitable share of the pension surplus either on leaving CMHC's employ or on distribution of the surplus?
iii)

Did CMHC and the trustees, or either one of them, stand in a fiduciary relationship to the class members in relation to the management and/or distribution of the pension surplus?
iv)

If CMHC and the trustees, or either one of them, stood in a fiduciary relationship to the class members in relation to the management and/or distribution of the pension surplus, did they, or either one of them, breach their fiduciary obligation to the class members by failing to ensure that the class members received their equitable share of the pension surplus either on leaving CMHC's employ or on distribution of the pension surplus?
v)

If it is found that CMHC and the trustees, or either one of them, breached their trust and/or fiduciary obligations to the class members so as to entitle the class members to recover their equitable share of the pension surplus including interest from them, or either one of them, should the equitable share of the class members be determined by using the same formula employed by CMHC to determine surplus when CMHC distributed the pension surplus?
vi)

If the class members are entitled to share in the pension surplus to the same degree and extent as existing and retired employees and on the basis of the same formula used by CMHC to determine the shares of existing and retired employees, how will the individual shares of the class members be distributed and can the internal records of CMHC be used for this purpose in terms of reliability?
vii)

If CMHC and the trustees, or either of them, have breached their trust and/or fiduciary obligations to the class members in relation to the management and/or distribution of the pension surplus, can CMHC and the trustees, or either one of them, rely on compromise agreements class members may have signed when they left CMHC's employ?

 17      The common issues ultimately certified are the following:

1.

Do members of the proposed class have an equitable and/or beneficial interest in the pension fund surplus which entitled them to an equitable share of what the defendants have characterized as "benefits enhancements" funded out of surplus?
2.

Did the failure of the defendants to include members of the proposed class to the extent of their equitable share in what the defendants have characterized as "benefits enhancements" funded from surplus amount to a breach of trust or fiduciary duty?
3.

If answer to (ii) above is yes, are the class members entitled to any remedy and, if so, on what basis?

Most of the common issues originally proposed are very similar to the issues which have been certified. Indeed issues i) and iii) are subsumed in certified common issue 1, proposed issues ii and iv are subsumed in certified common issue 2; proposed issue v and vi are subsumed in certified common issue 3. Issue vii was abandoned. As framed it may well have stood as a proper common issue although it would likely also have raised individual issues.

 18      Counsel for the defendants still had some concerns after the cross-examination. These were expressed as follows in a letter from Mr. Ritchie to Mr. Sammon on April 20, 2000:

As you are aware, our opposition to certification has been largely based on our view that the proposed "common issues" may, in fact, be different for members of the proposed class; depending on when they left CMHC, what they knew or were told prior to making their election, and whether they relied detrimentally on information provided or not provided by CMHC. We now understand, based on answers that were given on the cross-examination, that the "common issues" in respect of this class proceeding are more narrow than we originally understood them to be.

On the cross-examinations you advised us that the Plaintiffs do not complain or rely, in support of their claim, on any allegations that "some information should have been communicated to them at or before the time when [the proposed class members] made their election", except for the existence of an alleged beneficial interest in the plan surplus. Further, with respect to the issue of communications relating to the alleged beneficial interest, we con-firm that you do not allege that the class members relied upon any communication, or lack of communication, to their detriment when making their respective elections. We understand that you take the position that the alleged failure "to indicate to the employees ... that [the Defendants] were trustees of the surplus but the employees had a beneficial interest in it", was a breach of trust because it reflected the Defendants' alleged failure "to protect the interest of the beneficial owners."

Since you are not alleging that class members relied to their detriment on information allegedly provided or withheld by the Defendants, individual enquiry of each class member may not be required by us in defending this action. As such, the proposed common issues are significantly more narrow than what we have previously anticipated. Assuming this to be the case, then, our client would be prepared to withdraw its objection to the certification of the proposed class, assuming that agreement can be reached on the definition of the common issues, and the terms of a Consent Order. (Emphasis added)

We propose that the common issues be redefined as follows:

1.

Did the members of the proposed class have a beneficial interest in the actuarial surplus in the ongoing CMHC plan which entitled them to inclusion in the group which received a re-designation of contributions arising out of the 1998 surplus review process?
2.

Did the failure of CMHC and/or the trustees to include them in that group amount to a breach of trust or breach of fiduciary duty?
3.

If the answer to #2 above is yes, are the class members entitled to any remedy, and if so, on what basis?

 19      Followed an exchange of several letters between Mr. Ledger and Mr. Sammon. This ultimately led to the minutes of settlement between the parties, the relevant portions of which state as follows:

1.

The plaintiffs, on behalf of the proposed class members, represent the following with respect to the scope of the allegations in the proposed class proceeding:

(a)

The claim advanced by the plaintiffs and the proposed plaintiff class (collectively, the "Plaintiffs") is based on alleged breach of trust and breach of fiduciary duty, and the allegations that relate to these claims are set out in the Statement of Claim and Certification Motion material;
(b)

The Plaintiffs allege that the defendant's alleged representation to the employees that CMHC owned the surplus is either a breach of their trust or fiduciary obligation to the Plaintiffs and class members or indicia thereof;
(c)

The Plaintiffs allege that the defendant's failure to advise the employees of their alleged beneficial interest in the surplus during the downsizing campaign is alleged by the Plaintiffs to be either a breach of trust or fiduciary obligation or an indicia thereof;
(d)

The Plaintiffs assert that any elections the Plaintiffs made in relation to their pension options which may have disentitled them to a share in CMHC's distribution plan are invalid in light of the defendants' alleged breach of trust, or fiduciary duty; however, the Plaintiffs will not be taking the position that any Plaintiffs relied on any representation or failure to advise in making their elections.
(e)

The Plaintiffs, at this time, do not assert that any of the Plaintiffs relied on the above-noted, or any other communications or non-communications from the defendants when making their elections to transfer their commuted value out of the CMHC pension fund except to the extent that such communications or non-communications may represent a breach of the defendants' trust and fiduciary obligations to the Plaintiffs, or indicia thereof;
(f)

The Plaintiffs do not believe, at this time, that there are any issues which will be individual in nature which would require an assessment of any individual's state of knowledge or understanding, the source of that knowledge or understanding or reliance thereon; and
(g)

The position set out in subparagraph (a) to (f) above is based solely on the Plaintiffs' current information and could conceivably change subject to obtaining the defendants' defence and any information revealed on discovery.

2.

As a result of, and in reliance on the position of the Plaintiffs described in paragraph 1 above, the defendants withdraw their opposition to the Certification Motion, and consent to an Order that this action proceed as a class proceeding, having a national class and on the common issues described at paragraph 3 below.

 20      It is important to note that the issue raised by paragraph 27 of the amended Statement of Claim, namely that the wording of the release "specifically noted they did not effect (sic) the benefit provisions pertaining to the CMHC Pension Fund", was not addressed by the certification order. If the wording of the release was to be the subject of individual issues to be addressed after the common issues, the litigation plan was silent about that issue.

 21      The defendants served a statement of defense and simultaneously moved for summary judgment. In that motion, the defendants basically take the position the plaintiffs were no longer members of the plan when the new benefits were allocated and therefore were not entitled to them.

 22      The plaintiffs filed affidavit evidence in response to the defendants' motion. The affidavit of the plaintiffs Rosie Ladouceur contains the following paragraphs:

73.

I am informed by a memo produced by David Guffie and do verily believe that he was specifically told by CMHC that his release form only related to severance and early departure allowances and not any claim he might have to the surplus. (Memo of David Guffie, Ex. Book "E", Tab C-1)
74.

I am informed and do verily believe by a letter produced by CMHC in response to the certification motion that another employee, namely Brenda Simons, was told by Mr. Atkinson and Mr. Knight of CMHC's Human Resource Department that if she took the commuted value of her pension, she would not be giving up any rights to the surplus. (Brenda Simmons letter to R. Lajoie, 15 September, 1998, Ex. Book "E", Tab C-11)
119(c)

Later that month, on the 26th June, 1998, a former employee, Yvon Mailholt, wrote Peter Smith, Chairman of the Board of Directors, saying he "was not advised at any time that all rights to pending resolutions of the Pension Fund Surplus would automatically be surrendered as a result of choosing the commuted value option." (Ex. Book "E", Tab C-9)

 23      The defendants objected to that evidence as being irrelevant and contrary to the minutes of settlement. Mr. Ritchie set out the position of the defendants in his letter of November 9, 2000:

It was a condition of the Minutes of Settlement, and of our consenting to the Certification Order, that evidence of any individual discussions or the absence of any individual discussions between members and CMHC representatives, and any suggestion of reliance by individual members on those or any other discussions or communications or alleged failure to communicate at an individual level would not be tendered by you in evidence in the Class Action. We understood that it is your intention to tender evidence only of general communications or alternatively, a failure to make general communications, with respect to surplus entitlement to the members group at large, in support of your allegation that certain communications (or lack thereof) constituted a breach of trust or breach of fiduciary duty, or indicia thereof. (Emphasis added)

 24      Counsel for the Plaintiffs responded to the Defendants' concerns in a letter dated November 14, 2000, as follows:

We have always taken the position that CMHC and the trustees breached their trust and fiduciary obligations to the plaintiff and class members by, inter alia:

a)

Failing to advise the plaintiff and class members of the beneficial interest in the pension fund surplus;
b)

By failing to advise the plaintiffs and class members that by taking their and would be disentitled to surplus;
c)

By representing to the plaintiffs and class members that the company owned the surplus to the exclusion of the downsized employees;
d)

By representing to the plaintiffs through releases drafted by CMHC that the plaintiffs would not be releasing any pension claims upon taking commuted value.

The Plaintiffs' Position

 25      Counsel for the plaintiffs submit that in the context of a claim for breach of trust or breach of fiduciary duty, the plaintiffs need not prove reliance by the plaintiffs on the defendants' breaches. They argue that the minutes of settlement were meant to address the issue of reliance. With this proposed evidence, the plaintiffs are not alleging reliance but simply that the misrepresentations or non-communications amounted either to a breach of trust which is actionable per se without proof of reliance or a breach of fiduciary duty and then the onus is on the defendants to disprove reliance.

 26      The plaintiffs conclude that they are proposing to introduce the evidence of misrepresentations to individuals only to establish conduct by CMHC amounting to a breach of trust and/or a breach a fiduciary duty. They are not focusing on what affect the conduct of the defendants had on the members' decision to take commuted value and/or sign the release, but on the conduct of the defendants itself.

The Defendants' Position

 27      The Defendants submit that the plaintiffs are expanding common issue No. 2 in the certification order to include a multitude of issues which are not common to the members of the class and as such should not be certified. Moreover, these issues will require highly individualized assessments and therefore a class proceeding is not the preferable procedure to resolve the certified common issues as expanded by the plaintiffs.

 28      The Defendants ask that the action be decertified. In the alternative, the Defendants ask that the Court make an order preventing the Plaintiffs from adducing evidence concerning individual state of knowledge, understanding and/or reliance in general and in particular regarding the impact on their election on surplus entitlement.

ANALYSIS

A. Principles Governing Decertification

 29      A decertification motion may be brought at any time by a party or a class Member. Section 10 of the Class Proceedings Act sets out the jurisdiction of the court in this regard:

 10.(1) On the motion of a party or class member, where it appears to the court that the conditions mentioned in subsections 5(1) and (2) are not satisfied with respect to a class proceeding, the court may amend the certification order, may decertify the proceeding or may make any other order it considers appropriate.

 (2) Where the court makes a decertification order under subsection (1), the court may permit the proceeding to continue as one or more proceedings between different parties.

 (3) For the purposes of subsections (1) and (2), the court has the powers set out in clauses 7(a) to (c).

 30      The court must therefore embark on the same analysis as in a certification motion to determine if all the 5 prerequisites set out in section 5 of the Act are present. In this motion, the defendants submit that items in section 5(1)(c) common issue, section 5(1)(d) preferable procedure and section 5(1)(e)(ii) workable plan are not met.

B. Common Issues

 31      Does the Statement of Claim raise one or more common issues? A common issue is defined in section 1 as:

a)

common but not necessarily identical issues of fact, or
b)

common but not necessarily identical issues of law that arise from common but not necessarily identified facts.

 32      What the court must look to in determining whether the claim raises common issues is set out as follows by Winkler J. in Carom v. Bre-X Minerals Ltd. (1999), 44 O.R. (3d) 173 at 193:

For the purposes of a class proceeding, common issues are not synonymous with common causes of action. Multiple plaintiffs may assert similar claims against a common defendant or defendants without raising common issues. The necessary nexus for certification is that the claims asserted raise "common, though not necessarily identical" issues of fact or law. Hence, the claims and the circumstances in which they are raised, must be analyzed to determine whether common issues are present.

A common issue must have sufficient significance in relation to the claim asserted such that its resolution will advance the litigation. Furthermore, the resolution of the common issue must advance the litigation in a meaningful way.

 33      The crux of the plaintiffs' case is that the defendants held the surplus in trust for the class members and the class members had a corresponding beneficial interest in the surplus. As a result thereof, the defendants could not plan to distribute any part of that surplus and ultimately do so without ensuring that the plaintiffs receive their beneficial interest in that trust fund. The resolution of that issue is certainly common to all class members and its resolution will certainly advance the litigation in the sense that its determination will actually dispose of one important aspect of the case and will move the litigation forward in a meaningful way.

 34      Indeed, by agreeing to the certification of the two first issues, the defendants admitted that they were properly certifiable common issues.

 35      The parameters of the issues in any litigation are defined by the pleadings. Here, as noted above, the statement of claim does not raise individual issues of misrepresentation affecting the validity of the releases except to the extent that the defendants are alleged to have generally resented to or misinformed the plaintiffs about the fact that they had a beneficial interest in the surplus. This was confirmed by Mr. Sammon at the cross-examination and basically the defendants accepted that as a valid common issue.

 36      However, nowhere in the statement of claim are the plaintiffs alleging that the defendants failed to tell individual class members that by taking their commuted value they would no longer be entitled to surplus or that the defendants represented to the plaintiffs that on signing the releases they were not releasing their rights in the pension fund. The only exception to this is the allegation in paragraph 29 about the wording of the release.

 37      Whether any alleged misrepresentation or failure to communicate is characterized as an act of breach of trust or fiduciary duty, if it is adduced in evidence to impeach the validity of the election of the class maker to take the commuted value or the validity of the release signed by the class member, this will necessarily raise a number of individual issues. For instance, what exactly was said to each plaintiff before signing his or her release, did the plaintiffs rely on that statement and so on.

 38      The issues which have been certified do not give rise to an inquiry as to whether the plaintiffs or class members were misled into signing the releases by the defendants except to the extent that the defendants failed to advise the plaintiffs and class members of the existence of a trust or fiduciary relationship between the plaintiffs and the defendants and the corresponding beneficial rights of the plaintiff in the surplus.

 39      If the plaintiffs wish to expand their claim in answer to the defendants' position that any rights the plaintiffs may have had in the surplus expired when they voluntarily left, by alleging that the releases were of no force and effect as a result of certain other misrepresentations, the plaintiffs must amend their statement of claim and specifically plead the facts in support of that claim. Otherwise evidence of any such misrepresentation would be irrelevant and inadmissible.

 40      Obviously in this case, the existence of the releases is a vital fact. For some reason, it was left out of the certification process. In hindsight, issue (vii) originally proposed by the plaintiffs in their certification motion, should have been dealt with by the court on the original motion. The validity of the releases or "compromise agreements" was raised in the statement of claim albeit in the narrow framework already discussed when the statement of claim pleaded the existence of the releases. In proposing issue (vii), "can CMHC and the trustees, or either of them, rely on compromise agreements class members may have signed when they left CMHC's employ", the plaintiffs were raising an essential issue which would have to be dealt with at one point or other. That issue could potentially raise both "common issues" and "individual issues". For example, would the simple fact of terminating one's membership have the effect of terminating any rights to the surplus or would the trust nature of the relationship continue in the circumstances pleaded by the plaintiffs? Surely that is a common issue. On the other hand, if the issue was: could the defendants rely on the release and/or election in the face of misrepresentations by the defendants as to their true effect on the plaintiffs' right to the surplus, then this would necessarily raise a number of individual issues. I repeat however that the plaintiffs did not allege in the statement of claim that the defendants misrepresented the true nature and/or effect of the releases and/or election. Moreover, even if such individual issues were pleaded and some of these issues had to be determined later in the action, it would not necessarily follow that the court would refuse to certify the action as a class action. I find there could still remain a number of important common issues the resolution of which would advance the litigation: see Carom v. Bre-X Minerals Ltd. (2000), 51 O.R. (3d) 236 (C.A.).

 41      The requirement that the claim raise one or more common issue is, therefore, met.

C. Preferable Procedure

 42      The approach that a court should take when assessing whether proceeding by way of class action is the preferable procedure was expressed as follows by Winkler J. in Carom v. Bre-X Minerals Ltd. (supra):

       The proper approach to be taken in considering whether a class proceeding is the preferable procedure for resolving the common issues is to have regard to all of the individual and common issues arising from the claims in the context of the factual matrix. A class proceeding is the preferable procedure where it presents a fair, efficient and manageable method of determining the common issues which arise from the claims of multiple plaintiffs and where such determination will advance the proceeding in accordance with the goals of judicial economy, access to justice and the modification of the behaviour of wrongdoers.

       As with the other criteria of certification there is an interaction between the common issues and the preferable procedure. In order for an issue to constitute a common issue in a class proceeding, the resolution of the issue must be capable of advancing the litigation in a legally material way. Thus in order for a common issue trial, and hence a class proceeding, to be the preferable procedure it must advance the litigation in such a way that the goals of the Act are met.

 43      In the Statement of Claim the plaintiffs are alleging one misrepresentation:

1.

The surplus belonged solely to CMHC and CMHC could do what it wanted with it.

The plaintiffs also plead that the defendants failed to communicate to the plaintiffs:

1.

That the surplus was subject to a trust and the plaintiffs and class members were the beneficiaries of that trust.
2.

That the trustees were planning to use the surplus to enhance the benefits of current and retired employees and pay for the cost of downsizing.

 44      These facts were intended to be relevant to the common issues as part of the agreement reached by the parties in the minutes of settlement of the certification motion. No other misinformation or misrepresentation was contemplated by the minutes of settlement.

 45      The goals of the Act are judicial economy, access to justice and behaviour modification of wrongdoers. One trial which would resolve the common issues noted above would certainly meet the goals of the Act. It would be preferable to deal with Certified issues 1, 2 and 3 in the context of a class action.

 46      In view of the issues raised by the statement of defense, a class action would also be the preferable procedure to answer the following issue:

In the absence of misrepresentation by the defendants inducing a class member to take the commuted value of his/her pension, other than those relating to the existence of the trust and the members' beneficial interest in the trust noted above, does the election by a member to take the commuted value of his/her pension terminate any beneficial right or interest he or she might have had in the surplus by virtue of the trust and/or fiduciary relationship.

 47      Put another way, in the absence of misrepresentation, can the defendants rely on the election as a defence in the context of the overall circumstances of this case. That issue was not spelled out but left underlying the whole debate. It would have had to be spelled out in order to avoid the confusion under which the parties are presently operating. That issue will need to be added as one of the common issues to be decided.

 48      I find that a class action is the preferable procedure to resolve the common issues. Naturally in coming to that conclusion, I am taking into account that the pleadings raise real and substantial common issues which need to be resolved and that in that context any individual issues could be dealt with after the resolution of the common issues. If the main and real focus of the action was the individual issues raised by allegations of misrepresentations to individual members inducing them to make their election, the class action would not be the preferable procedure.

D. Workable Plan

 49      The defendants correctly point out that the trust and/or fiduciary relationship issues may vary between non-TRA and TRA plaintiffs. The difference would arise at the stage where the court would have to decide whether the beneficial status of the members survived despite the fact they were no longer members of the Plan. In the case of the TRA members, they continued to be plan members after January 1, 1999, although in a reduced position, and as such they may have rights and interests beyond those of the non-TRA members. This matter can be addressed by forming a sub-class composed of the TRA members only and formulating a common issue to cover their particular situation.

 50      I agree with the defendants that the plaintiffs have failed to provide a workable litigation plan to cover the particular situation of the TRA members and to identify exactly what individual issues will remain to be decided and provide a framework to do so. This will become even more crucial and difficult, if the pleadings are amended to raise issues of individual misrepresentation. As I have indicated those issues are not presently before the court and they will have to be considered if and when they arise.

 51      The wording of the releases signed at the time of the election is an issue raised by the claim presently before the court. Not all members signed a release and those who did, did not all sign the same release at the time of their election. It will be necessary to set out in the litigation plan a plan to address the various types of wording of the various releases. It might be that once this has been done sub-classes will need to be created with one or more common issue spelled out to cover the various releases. It might be that this issue will need to be addressed as one or more individual issues. The court does not have sufficient information to decide these questions at this time.

CONCLUSION

 52      The decertification motion is dismissed provided the plaintiffs submit within 60 days a workable litigation plan to the concerns raised in the above reasons.

 53      A sub-class is created to cover the particular situation of the TRA members. A representative plaintiff for that class is to be submitted for the court's approval within 60 days along with a proposed common issue to cover their particular situation.

 54      An additional common issue will have to be formulated to cover the full effect of the members terminating their membership in the plan as discussed above. One or more additional issues will have to be formulated to cover the issues relating to the various types of releases signed. In both cases the litigation plan will need to set out clearly how these issues will be dealt with in the context of the overall action.

 55      The plaintiffs are not permitted to adduce evidence of individual misrepresentations affecting the validity of a member's election except misrepresentations or failures to communicate addressing the following facts:

1.

The surplus as the sole property of CMHC.
2.

The members had no beneficial interest in the surplus and the surplus was not subject to trust.
3.

The trustees were planning to use the surplus to enhance the benefits of current and retired employees and pay for the cost of downsizing.

 56      Counsel may provide the Court with written submissions on costs within thirty (30) days if they deem it advisable.

M.Z. CHARBONNEAU J.

QL UPDATE:  20050914
cp/s/np/qljxh/qlkjg/qlrme